Providing a concise overview of indemnification in technology contracts, aiming to assist business professionals and new attorneys in understanding this complex legal concept.

1. Definition of Indemnification:
   • Indemnification involves the indemnifying party’s promise to cover certain losses, liabilities, and expenses (collectively termed “Losses”) of the indemnified party arising from specified occurrences outlined in the contract.
   • It typically includes both the obligation to “defend” (i.e., pay for legal representation) and “indemnify” (i.e., compensate for Losses).
2. Understanding “Hold Harmless”:
   • “Hold harmless” often accompanies “indemnify,” though its legal implications vary across states.
   • Generally treated as synonymous with “indemnify,” “hold harmless” may imply a release preventing direct legal action between parties.
3. Purpose in Technology Contracts:
   • Indemnification addresses the heightened risk of third-party litigation resulting from business arrangements.
   • It serves to allocate responsibility for legal defense and costs related to potential third-party claims.
4. Enumerated Indemnified Claims:
   • Common indemnified claims in technology contracts include intellectual property infringement, data breaches, and disclosure without proper authorization.
   • Negotiation dynamics influence the specific indemnities included, with some considered “market terms” expected by customers.
5. Triggering Indemnification:
   • Indemnification obligations activate upon the occurrence of third-party claims specified in the contract.
   • Regardless of the claim’s merit, the indemnifying party is obligated to defend and cover Losses once a third party asserts a claim.
6. Limitations and Scope:
   • Indemnification does not address disputes between contracting parties over breaches of contract; instead, it focuses on third-party claims.
   • The indemnifying party’s financial exposure, even in cases where it ultimately prevails, can be substantial, leading to contentious negotiations.

IF YOU NEED HELP UNDERSTANDING A CONTRACT, REVIEWING OR AMENDING A CONTRACT, OR NEED AN INDEMNIFICATION CLAUSE, CALL MCMECHAN LAW.